Tax breaks boost North Sea activity

Group Business Correspondent

Wednesday 13 March 2013

CONFIDENCE levels have increased in the North Sea where tax breaks introduced last year have started to boost activity levels, but some maintenance work is being held up by a shortage of helicopters.

BOOST: Service firms are cashing in on investment in the North Sea by industry giants. Picture: Angela Catlin

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MARK WILLIAMSON

Oil & Gas UK said its confidence index increased to 60 in the last quarter of 2012 from 58 in the previous three months as services firms cashed in on increased investment in the North Sea by industry giants.

A reading above 50 is considered positive.The survey findings point to a marked increase in confidence among big operators of oil and gas fields, which the trade body said could be due to the introduction of several tax allowances by the UK Government in recent months.These have encouraged firms to invest in big new developments in areas like west of Shetland and in boosting output from existing fields.On Monday, Alex Salmond tried to revitalise the campaign for independence by producing a report claiming reserves in Scottish waters could yield up to £57.1 billion tax revenues between the current financial year and 2017/18. This is up to 82% more than previously accepted figures indicated.Last week the leak of a secret cabinet briefing paper by Finance Secretary John Swinney revealed fears in the Scottish Government about the state of the country's finances and the impact on public spending given its reliance on volatile and declining oil revenues. The paper was prepared around 12 months ago.Increased activity by oil and gas firms has generated more work for the firms that help them develop and run projects. Confidence levels among services firms increased in the fourth quarter."The optimism felt by the contractor community could be directly linked to the increase in operators' activities due to the positive tax changes in the third quarter," said Oil & Gas UK."Many contractors have managed to secure long-term contracts and additional projects, which in turn has led to plans for company expansion being reported ... employment levels in the contractor sector have increased."However, services firms are facing problems as a result of curbs on helicopter flights imposed following two ditchings in the North Sea last year.The Civil Aviation authority issued a directive forbidding the use of EC225 helicopters for offshore transport.Oil & Gas UK said contractors raised concerns about "ongoing tightness in helicopter capacity." It added: " Fabric and maintenance work is being pushed back until this is resolved."The organisation's health and safety director, Robert Paterson, said: "The suspension of EC225s has led to a significant proportion of the offshore fleet operating out of Aberdeen being unavailable. As a result, oil and gas companies have been working together to make sure available seats on helicopters are made available to those which most need them. Some com-panies have scaled back non-essential work and made transfer of their core personnel a priority in order to ensure continued safe operations."Oil & Gas UK cautioned: "Majors and independents reported higher manpower rates and difficulties in retaining skilled personnel, which seems to be a recurring theme throughout the last three quarters of 2012."It noted: "Contactors are also experiencing similar difficulties."Oonagh Werngren, Oil & Gas UK's operations director, said: "The challenge of recruiting and retaining skilled staff, while also accommodating increasing operation costs, emerges as a recurrent theme in feedback from the majority of companies surveyed for the index and suggests this is exerting a steadying influence on the rising wave of optimism in the industry."Earlier this month, Lloyds Banking Group said its research showed oil and gas firms could create up to 34,000 jobs in the UK over the next two years but some feared skills shortages could limit growth.Oil & Gas UK also noted: "It seems the independents have had greater difficulies in obtaining drilling rigs compared to the majors, and for some access to finance is still a problem."The confidence index for independent operators fell to 55 from 57 in the third quarter. The reading for major operators increased to 64 from 58.The contractor confidence index increased to 61 from 58.

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Tax breaks boost North Sea activity

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